- Strong nutrient demand expected in 2016 as acreage increases
- Company's 2016 profit forecast falls short of expectations
Agrium Inc., the largest agricultural retailer to U.S. farmers, posted better-than-expected fourth-quarter profit after cost cuts at its stores and fertilizer-production business.
Net income rose to $1.45 a share from 33 cents a year earlier, Calgary-based Agrium said Tuesday in a statement. Profit excluding one-time items was $1.52 a share, beating the $1.38 average of 22 analysts’ estimates compiled by Bloomberg.
Sales fell 11 percent to $2.41 billion, trailing the $2.83 billion average estimated by analysts. In 2016, net income will be $5.50 to $7 a share, the company said. That lagged behind the $7.01 average estimate.
“The long-term outlook for our business remains robust,” Chief Executive Officer Chuck Magro said on a conference call with analysts and investors. Demand for grain, oilseeds and fertilizer will increase consistently over time, even amid turmoil in commodity markets, Magro said.
Agrium fell 0.4 percent to $83.69 in New York.
Production costs dropped while sales volumes gained in the fourth quarter for nitrogen and potash fertilizer, countering lower prices for crop inputs. In the retail business, expenses dropped 10 percent, outweighing the effect of lower prices and weather-related delays to crop-chemical applications.
The weaker-than-expected full-year forecast “is likely due to differences in nutrient-price expectations,” Andrew Wong, an analyst at RBC Capital Markets in Toronto, said in a report. “More importantly, we think the strong retail guidance should be viewed as a long-term positive, given the strong performance in a difficult ag environment.”
Demand for crop nutrients is expected to be robust this year, with growers in the U.S. projected to boost total crop acres while also catching up with the application of fertilizers after weather-related delays in the fall, Agrium said.
While North American crop-nutrient demand is expected to increase by 1 percent to 3 percent, phosphate and potash demand may fall below that range as volumes lost due to the poor fall season may not be fully made up in the first half of 2016, the company said.
A “slight loss” in first-quarter profit is expected amid a seasonal slump in demand, Chief Financial Officer Steve Douglas said on the company call. Nitrogen prices may improve in the spring and beyond, he said.